More than two weeks after the USA extended deadlines, Chinese-American trade talks seem to be coming to an end. China is rightfully worried, because its growth target for 2019 has been reduced to 6-6.50% and might be reduced further; its budget deficit target of 2.80% of GDP has been set to prevent too much decline. Currently trading at 6.7097, USD/CNY is expected to stay flat until upcoming announcements.
Investors are worried, too, hoping to avert US tariffs on USD 250 billion on Chinese goods. Trade figures came well below consensus in February, with exports, down 20.70% (consensus: -5%) amid Chinese New Year effects, and imports continued down, suggesting Chinese domestic demand is softening. New loans hit CNY 885.8 billion in the same period, below expectations but still up since the beginning of the year, up 4.12 trillion year-to-date compared to 3.2 trillion in the same period last year. As trade talks continue, we expect the discussion to accelerate, as the agreement needs to be very specific. For the time being, Chinese authorities will closely monitor shadow banking risk and maintain credit growth